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Was Ricardo Right?

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  • Maddison, David
  • Rehdanz, Katrin

Abstract

Records of rental agreements for agricultural land in England between 1690 and 1914 are used to develop an annual rental price index for agricultural land. This index displays a long run cointegrating relationship with indices for the price of agricultural output and agricultural wage rates. A vector error correction model illustrates the powerful long run causal influence of the price of agricultural output and wage rates on rents. By contrast, there is no evidence that rents cause wage rates or the price of agricultural output. Such results suggest that Ricardo was right when he posited that rent was a residual driven by increases in the price of agricultural output rather than the other way around. Matters are different however when the price of individual agricultural commodities is used rather than the price of agricultural output. In this situation there emerges a bidirectional causal relationship of the type envisaged by Jevons. Lastly our framework can also be used to measure the rate of technical progress in agriculture. While we cannot find a statistically significant level of technical progress before the industrial revolution, after 1785 the rate of technical progress is a brisk 1.8 percent per annum.

Suggested Citation

  • Maddison, David & Rehdanz, Katrin, 2014. "Was Ricardo Right?," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 169733, Agricultural Economics Society.
  • Handle: RePEc:ags:aesc14:169733
    DOI: 10.22004/ag.econ.169733
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    References listed on IDEAS

    as
    1. Ahmed Alyousha & Christopher Tsoukis, 1998. "Ricardian causal ordering and the relation between house and land prices: evidence from England," Applied Economics Letters, Taylor & Francis Journals, vol. 5(5), pages 325-328.
    2. Elias Oikarinen, 2009. "Dynamic linkages between housing and lot prices: Empirical evidence from Helsinki," Discussion Papers 53, Aboa Centre for Economics.
    3. Clark, Gregory, 1998. "Renting The Revolution," The Journal of Economic History, Cambridge University Press, vol. 58(1), pages 206-210, March.
    4. Robert C. Allen, 1999. "Tracking the agricultural revolution in England," Economic History Review, Economic History Society, vol. 52(2), pages 209-235, May.
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    Keywords

    Community/Rural/Urban Development; Consumer/Household Economics; International Development; Land Economics/Use;

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